UNDERSTANDING THE PURPOSE OF A CORPORATE CREDIT CARD – Island Echo
If you’re a business owner, or at least planning to own a business, chances are you have an idea of the different types of expenses to expect from time to time. These expenses should be budgeted, tracked and recorded, so that they are reflected in the accounting books. The transaction details for these transactions should also be kept so that they can be used as deductible during the tax period.
Well, nothing is better for providing such information than a credit card. What’s more, having one also ensures quick access to funds to meet various financial obligations and common business expenses when you are strapped for cash or cash in your bank account. Nevertheless, it is important to have a credit card dedicated solely to business-related expenses. As we seek to shed some light on the purpose of a business credit card, this article highlights a few ways it can benefit you.
1. Earn rewards and bonuses
If you have a personal credit card, you should be aware of the rewards you can get from each expense. For a business credit card, the difference is that spending is likely to be higher, which only means higher rewards and more bonuses in terms of cashback, miles, or redeemable points. If you find the right business credit card for your needs, cash back rewards allow you to pay less for your expenses. Any savings you make can be redirected to other uses that benefit your business.
For a business that involves a lot of travel, they can benefit from the offer of miles. Sometimes you or some of your employees can travel without paying a dime. The good thing is that the card can be tailored to suit your business needs, which is well worth the effort.
2. Good for separating business and personal expenses
It’s easier to mix things up when you use the same card for your personal and business needs. Dividing them at the end of the month can be a nerve-racking process. Despite your sharpness, keep track of all expenses the details are not easy. Did you take and pay for the taxi for personal or professional reasons? And that lunch you had on a weekend… was it a personal or business expense? These small transactions can easily confuse you. With a business credit card, however, it becomes easier to separate these two elements. This makes the job easier when calculating for tax purposes.
In addition, your personal credit card can sometimes be blocked. Does that mean your business needs to close for the day? Having both cards will ensure that your business is running even if your individual card has been discontinued or is out of service.
3. Make financial accounting easier
Taking note of all money transfers can be overwhelming if there are many transactions involved. Dealing with cash also makes it difficult to track flows. At the end of the day, you have a lot of papers and a disorganized accounting system. All of this is simplified by a map. In addition, some cards allow you to upload purchase details to Excel. This means you get a more organized and clear view of spending. In addition, depending on the card you acquire, you can get a summary for the requested duration. It makes you aware of the item you spend the most, therefore adjustments. Therefore, with a card, you have access to financial management tools at no additional cost. Also, all of this makes it easier for tax purposes, which puts the IRS off your back.
3. Improve cash flow
Business expenses are endless. Sometimes you pay with cash until you are without. It’s a position no business should be in. Having a credit card means you always have the money to use. This can be in terms of obtaining additional raw materials or other high-end business activities. In addition, when running a business, unexpected situations can arise at any time. The card gives you the security you can fall back into. Whether it’s unforeseen outages or internal emergencies, you will always have a way out. Hence, it saves you from mental breakdown in case the worst happens.
5. Positive business credit portfolio
By using a business card, you create your business credit score. However, it’s not just based on usage; you need to make payments early. A good credit history makes you attractive to investors and lending institutions. If your business has no documents to show, you might not be eligible for a bank loan despite your performance. Investors also tend to shy away from these companies. You may feel financially secure at first, but think about the years to come. These sources of capital can provide you with additional cash to develop or improve. Therefore, the card will improve your chances of getting loan and support.
6. Monitor employee expenses
In a business with many employees, it can be a bit difficult to process refunds of personal money used for business purposes. With a credit card for your business, however, employees can use it for work-related expenses. This will avoid conflicts and save time that could be used to decipher the difference. An organization that has many departments can integrate this. From the map summary, a manager can identify the wing that spends the most. This can be used for cost benefit analysis. Thanks to this, all the finances of the company are taken into account. In addition, action can be taken against those who abuse business advantages.
A credit card gives you financial preparation and easy access to cash for different types of purchases. If you have a dedicated business credit card, the benefits are even greater. It offers you a high level of convenience when it comes to business expenses. Whether it’s avoiding cash flow emergencies, tracking staff costs, improving business credit, and helping with tax deductibles, the benefits of having one are many. Solving money-related problems just got easier and less frustrating. With the few tips above in mind, you have a substantial amount of information available regarding the purpose and benefits of having a credit card in your business name.